Justice Scalia and Sherman Act Textualism

Transcription

1 College of William & Mary Law School William & Mary Law School Scholarship Repository Faculty Publications Faculty and Deans 2017 Justice Scalia and Sherman Act Textualism Alan Meese William & Mary Law School, Repository Citation Meese, Alan, "Justice Scalia and Sherman Act Textualism" (2017). Faculty Publications Copyright c 2017 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository.

2 JUSTICE SCALIA AND SHERMAN ACT TEXTUALISM Alan J. Meese* INTRODUCTION Section 1 of the Sherman Act prohibits contracts in restraint of trade or commerce among the several States. 1 How should a proponent of an original public meaning approach to statutory interpretation go about determining whether a challenged agreement is, in fact, in restraint of trade? The most straightforward approach, it would seem, would be to read in restraint of trade as a common-law term of art invoking a rich body of contract law, generated largely by state courts, in place in 1890 when Congress passed the Act. This body of law defined with some precision the types of contracts that courts declined to enforce. By employing this term, it might be said, Congress presumably invoked that body of law and compelled federal courts to ban those restraints, but only those restraints, that common-law courts would have declined to enforce in Conceptually, then, judicial enforcement of the Sherman Act could be a straightforward exercise in legal research, familiar in some respects to the approach that originalists have taken in other statutory contexts. 2 But Justice Scalia took a different approach to the Sherman Act. Most notably, in Business Electronics Corp. v. Sharp Electronics Corp., the Justice rejected the claim that the Sherman Act simply banned a fixed list of agreements deemed unenforceable in Instead, he said, section 1 of the Act 2017 Alan J. Meese. Individuals and nonprofit institutions may reproduce and distribute copies of this Essay in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice. * Ball Professor of Law, Tazewell Taylor Research Professor, and Co-Director, Center for the Study of Law and Markets, William and Mary Law School. Judicial Clerk to Justice Antonin Scalia, The author thanks Aaron Bruhl and Barry Cushman for helpful conversations about this topic. 1 Sherman Act, ch. 647, 1, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. 1 (2012)). 2 Cf. Moskal v. United States, 498 U.S. 103, (1990) (Scalia, J., dissenting) (invoking pre-statutory interpretations of a statutory term of art as establishing the meaning of the contested term); see also infra notes and accompanying text (discussing other examples) U.S. 717, 732 (1988). 2013

3 2014 notre dame law review [vol. 92:5 bans agreements that produce a particular economic consequence. 4 That consequence was the exercise of market power to the detriment of consumers. 5 Moreover, he said, both the actual and perceived impact of identical agreements can differ in varying times and circumstances. 6 Thus agreements deemed in restraint of trade (by common-law courts) and thus contrary to the Sherman Act in 1890 can become perfectly lawful in 1990, despite the lack of any intervening change in the statutory text. Under this approach, adjudication under the Sherman Act is less an exercise in historical research than an opportunity for microeconomic analysis, drawing upon recent law review articles instead of nineteenth-century state reports. Indeed, the account of the meaning of the Sherman Act sketched and applied in Business Electronics replicated that advocated by leading members of the Chicago School of antitrust analysis, particularly Robert Bork and Frank Easterbrook. Both jurists, and the Chicago School in general, have read the Sherman Act to articulate a standard, consumer welfare, delegating to courts authority to employ economic analysis to determine whether a challenged agreement reduces such welfare and thus violates the Sherman Act. Some scholars claim that Justice Scalia s Chicago-style antitrust jurisprudence contradicted his professed commitment to reading statutes according to their original public meaning. At least as practiced by the Justice, they say, an original public meaning approach would require courts to treat the term in restraint of trade as invoking a set of fixed common-law rules, not the sort of economic standard the Justice endorsed in Business Electronics. These rules, they say, did not reflect concern for consumer welfare but instead values such as fairness and individual autonomy and thus often diverged from the result that application of an economic standard would produce. These same scholars contend that the original public meaning approach necessarily precludes the sort of dynamic approach Justice Scalia endorsed in Business Electronics. That is, despite section 1 s invocation of the common law, judges generating section 1 jurisprudence must ignore advances in economic theory, even if such advances entirely undermine the economic premises of particular common-law rules. Indeed, some such scholars contend that Justice Scalia s approach to section 1 exemplifies the approach that jurists take to socalled super statutes as opposed to mere ordinary legislation and thus departs from his professed method of statutory interpretation. This Essay offers a defense of Justice Scalia s approach to the Sherman Act. For one thing, the approach broke little new ground, either in general or as applied in cases such as Business Electronics. Instead, such an approach was a faithful implementation of Standard Oil Co. of New Jersey v. United States, which announced section 1 s Rule of Reason. 7 After its own lengthy exegesis of the common law, Standard Oil announced that the term restraint of 4 Id. at See infra notes and accompanying text (explaining that Business Electronics treated such an exercise of market power as the sole cognizable antitrust harm). 6 Bus. Elecs., 485 U.S. at U.S. 1, (1911).

4 2017] justice scalia and sherman act textualism 2015 trade does not refer to a set of fixed rules, but instead directs courts to apply a standard of reason when evaluating challenged restraints. 8 That is, courts should ask whether a challenged agreement produces monopoly or the consequences of monopoly, namely, higher prices, reduced output, and/or reduced quality. A broader reading, the Court said, would ban contracts and combinations protected by liberty of contract. 9 Moreover, in making this assessment, Standard Oil said, courts should recognize that economic conceptions change over time, and apply the latest conception when evaluating the impact of a restraint. 10 Of course, Justice Scalia was sometimes willing to abandon longstanding precedent if he believed that that precedent deviated significantly from a correct reading of the relevant legal text. Thus, stare decisis is not a categorical defense to claims that the Justice deviated from his stated approach to interpretation in the Sherman Act context. This Essay therefore attempts to test various scholars claims that an original public meaning approach to the Sherman Act produces statutory meaning different from that announced in Business Electronics and, for that matter, Standard Oil. The Essay rejects the Supreme Court s apparent claim that the absurdity canon supports Standard Oil s reading of section 1, as the statutory text does not satisfy Justice Scalia s standard for declaring a term absurd. Nor would most modern proponents of original meaning embrace Standard Oil s invocation of liberty of contract as a rationale for reading the statute narrowly. This leaves the common law as the last possible support for Standard Oil s Rule of Reason. Modern scholars, as already noted, (implicitly) claim that Standard Oil misread the common law, mistakenly imputing to that jurisprudence a purely economic standard. However, evaluation of the claim that Business Electronics takes a nontextual approach does not require us to adjudicate this dispute about the meaning of the common law. As this Essay shows, the common law was not the only body of law relevant to the meaning of the term restraint of trade or commerce when Congress passed the Sherman Act in Instead, the term restraint of... commerce among the several states appeared several times in the Court s Commerce Clause jurisprudence during the 1880s. 11 That is, the Court employed this term as a synonym for (state) regulation of commerce among the several states, regulation that Congress had implicitly preempted according to what we now call the Court s dormant Commerce Clause jurisprudence. According to that well-developed body of law, a state statute was such a restraint or regulation of commerce among the several states if it directly burdened or directly obstructed interstate commerce. Regulations that imposed socalled indirect restraints of such commerce, by contrast, fell within states exclusive authority to impose. By enforcing this distinction, the Court created a regime of free trade among the states, thereby preventing states from 8 Id. at 60 (emphasis added). 9 See id. 10 Id. at See infra Part I.

5 2016 notre dame law review [vol. 92:5 interfering with the competitive allocation of resources and exploiting consumers. The Court s pre-sherman Act Commerce Clause jurisprudence and its distinction between direct and indirect restraints provides a potent source of meaning for the term restraint of trade or commerce. Congress, of course, possessed no general authority to generate a common law governing private contracts in Instead, the Sherman Act was, on its face, an exercise of the power to regulate [c]ommerce... among the several States, 12 a power that consisted of the authority to preempt regulations or restraints of interstate commerce. The Court s dormant Commerce Clause jurisprudence, which defined that category of state-imposed restraints that Congress had implicitly preempted, therefore provided a ready definition of the term restraint of trade or commerce among the several states, and a definition that implements the then-extant limits on congressional power. That is, the term restraint of trade or commerce could refer to those contracts or agreements that directly obstruct or burden trade and thus, like analogous state statutes, impermissibly regulate commerce and fall within Congress s authority for that reason. This definition, of course, would exclude so-called indirect burdens or obstructions from the reach of the Act, leaving such agreements exclusively within the jurisdiction of the states, even if such agreements were otherwise unenforceable according to the common law of Of course, identification of one possible source of meaning does not thereby exclude other possibilities. Instead, such identification merely requires the interpreter to choose between the competing sources identified. Such a choice is relatively straightforward in this context, however. After all, the direct/indirect taxonomy was not merely linguistic. It also communicated a distinction of constitutional dimension, denying Congress authority over agreements that merely restrained trade indirectly. Beginning with this premise, reading the Act to invoke the common law of contracts would be awkward at best. At worst, reading the Act to incorporate the common law of contracts, even those connected in one way or another to interstate commerce, is an anachronism, as Congress would have no authority over those agreements that restrained commerce indirectly. Thus, reading the term contract[s]... in restraint of trade to codify the common law of contracts would purport to ban entire categories of agreement over which Congress possessed no authority in the first place. The Supreme Court took just this approach in no fewer than five early decisions interpreting the Act during the 1890s. 13 While some have claimed that the Court invoked the common law, the Justices in fact read the direct/ indirect distinction into the Act, expressly holding that section 1 only bans 12 U.S. CONST. art. 1, 8, cl See Addyston Pipe & Steel Co. v. United States, 175 U.S. 211 (1899); Hopkins v. United States, 171 U.S. 578 (1898); United States v. Joint Traffic Ass n, 171 U.S. 505 (1898); United States v. Trans-Mo. Freight Ass n, 166 U.S. 290 (1897); United States v. E.C. Knight Co., 156 U.S. 1 (1895).

6 2017] justice scalia and sherman act textualism 2017 restraints that direct[ly] and immediate[ly] regulate, and thus restrain trade or commerce among the several states. 14 Moreover, when deciding whether a restraint was direct or indirect, the Court employed a standardslike approach, examining the nature of the industry and the economic purposes of the restraint. 15 I. SECTION 1 S EVOLVING RULE OF REASON Passed in 1890, section 1 of the Sherman Act prohibits contract[s], combination[s]... or conspirac[ies], in restraint of trade or commerce among the several States. 16 Section 2 prohibits monopoliz[ation] of any part of the trade or commerce among the several States. 17 During the Act s first two decades, the Supreme Court read the Act in an apparently formalistic fashion, holding that the Act prohibited only direct restraints of interstate commerce, while leaving so-called indirect restraints unscathed. 18 In 1911, however, the Court shifted course, at least rhetorically. In Standard Oil Co. of New Jersey v. United States, the Court embarked upon a lengthy exegesis of the history of judicial and legislative treatment of trade restraints. 19 This history, the Court said, established that Congress meant courts to employ the standard of reason when determining whether an agreement is in restraint of trade within the meaning of the Act. 20 Application of the statute to every case within its literal language, the Court said, would be destructive of all right to contract or agree or combine in any respect whatever as to subjects embraced in interstate trade or commerce. 21 By giving the statute a reasonable construction, then, the Court avoided applications of the stat- 14 See, e.g., Addyston Pipe & Steel Co., 175 U.S. at 234; Hopkins, 171 U.S. at 592; see also infra notes and accompanying text (collecting and discussing additional citations). 15 See infra notes and accompanying text. 16 Sherman Act, ch. 647, 1, 26 Stat. 209 (1890) (codified as amended at 15 U.S.C. 1 (2012)). 17 Sherman Act 2, 26 Stat. at See Hopkins, 171 U.S. at 581, 594 (holding that the Act did not ban rules promulgated by a cattleman s association because such restraints were indirect ); Joint Traffic Ass n, 171 U.S. 505 (holding that the Act prohibited horizontal price fixing between interstate railroads that had received special benefits and privileges from various states); id. at (opining that the Act did not prohibit so-called indirect restraints of interstate commerce); E.C. Knight Co., 156 U.S. at (holding that a merger creating a national sugar monopoly was merely an indirect restraint and thus beyond the scope of the Act) U.S. 1, (1911). 20 Id. at 60 ( Thus not specifying but indubitably contemplating and requiring a standard, it follows that it was intended that the standard of reason which had been applied at the common law and in this country in dealing with subjects of the character embraced by the statute, was intended to be the measure used for the purpose of determining whether in a given case a particular act had or had not brought about the wrong against which the statute provided. ); id. at 64 (referring to the statute as clearly fixing a standard ). 21 Id. at 63; see also United States v. Am. Tobacco Co., 221 U.S. 106, 180 (1911) ( [Standard Oil held] that the duty to interpret which inevitably arose from the general character of the term restraint of trade required that the words restraint of trade should be given a meaning which would not destroy the individual right to contract and render diffi-

7 2018 notre dame law review [vol. 92:5 ute that would infringe upon liberty of contract, which the Court had recognized in then-recent decisions such as Lochner v. New York 22 and Adair v. United States. 23 Such a Rule of Reason, of course, requires courts to determine the content of the standard of reason to be applied. Standard Oil itself suggested that the common law s Rule of Reason required courts to ask whether a restraint produces monopoly or the consequences of monopoly, which the Court defined as higher prices, reduced output, or lower quality. 24 The Court also endorsed a flexible approach to ascertaining the economic impact of restraints and thus their status under the Rule of Reason, discussing with approval common-law decisions that had refashioned doctrine in light of more accurate economic conceptions. 25 In the end, the Court said, the Rule of Reason required judges to employ the light of reason to determine whether a challenged agreement offended the public policy embodied in the statute, a process that, while applying a fixed normative standard, could produce different doctrinal results as economic conceptions evolved over time. 26 cult if not impossible any movement of trade in the channels of interstate commerce the free movement of which it was the purpose of the statute to protect. ) U.S. 45 (1905) U.S. 161 (1908); see also RUDOLPH J.R. PERITZ, COMPETITION POLICY IN AMERICA, : HISTORY, RHETORIC, LAW 58 (1996) ( Standard Oil... can be understood as closing Lochner s circle of individual liberty. ); Alan J. Meese, Standard Oil as Lochner s Trojan Horse, 85 S. CAL. L. REV. 783, (2012) (explaining that Standard Oil s Rule of Reason implemented Lochner-like protection for liberty of contract). 24 Standard Oil, 221 U.S. at (explaining the development of common law equating restraint of trade with contracts or acts which it was considered had a monopolistic tendency, especially those which were thought to unduly diminish competition and hence to enhance prices in other words, to monopolize ); id. at 61 (referring to the previous history of the law of restraint of trade to which we have referred and the indication which it gives of the practical evolution by which monopoly and the acts which produce the same result as monopoly, that is, an undue restraint of the course of trade, all came to be spoken of as, and to be indeed synonymous with, restraint of trade ); id. at 52 (describing consequences of monopoly as: 1. The power which the monopoly gave to the one who enjoyed it to fix the price and thereby injure the public; 2. The power which it engendered of enabling a limitation on production; and, 3. The danger of deterioration in quality of the monopolized article which it was deemed was the inevitable resultant of the monopolistic control over its production and sale ); see also Alan J. Meese, Price Theory, Competition, and the Rule of Reason, 2003 U. ILL. L. REV. 77, (describing Standard Oil s focus on price, output, and quality). See generally Robert H. Bork, The Rule of Reason and the Per Se Concept: Price Fixing and Market Division, 74 YALE L.J. 775, (1965) (discussing Standard Oil s Rule of Reason). 25 Standard Oil, 221 U.S. at 55, 58; see also HERBERT HOVENKAMP, FEDERAL ANTITRUST POLICY: THE LAW OF COMPETITION AND ITS PRACTICE 69 (4th ed. 2011) (explaining that pre- Sherman Act common law reflected rules of classical political economy concerning the nature of competition and the efficiency consequences of various anticompetitive practices ). 26 Standard Oil, 221 U.S. at 64; see also id. at (discussing with approval American common law and legislation that depend[ed]... upon the economic conceptions which

8 2017] justice scalia and sherman act textualism 2019 Subsequently the Court changed course, however, suggesting at various times during the twentieth century that courts should include certain noneconomic considerations, such as autonomy and fairness, in the standard of reason as well. 27 This normative shift, combined with economic theory suspicious of departures from atomistic competition, produced the socalled inhospitality tradition of antitrust, pursuant to which courts condemned numerous nonstandard agreements that produced no harm and often produced significant benefits. 28 While nominally applications of Standard Oil s Rule of Reason, 29 these decisions substituted an entirely different criterion of reasonableness, condemning many agreements simply because they restricted rivalry and departed from atomistic competition. 30 The Chicago School began to challenge this interventionist orthodoxy in the 1950s. This challenge had three components: normative, scientific, and jurisprudential. As a normative matter, Chicagoans expressed a preferobtained at the time when the legislation was adopted or judicial decision was rendered with the result that contracts or acts were at one time deemed to be of such a character as to justify the inference of wrongful intent which were at another period thought not to be of that character ). 27 See, e.g., United States v. Topco Assocs., Inc., 405 U.S. 596, (1972) (banning ancillary horizontal restraints between modest market participants despite finding that such restraints produced no harm and improved interbrand competition); id. at 610 (holding that the Sherman Act is the Magna Carta of free enterprise ); Albrecht v. Herald Co., 390 U.S. 145, (1968) (banning maximum resale price maintenance as unlawful per se despite the practice s tendency to reduce consumer prices because, inter alia, the practice interfered with the freedom of traders ), overruled by State Oil Co. v. Khan, 522 U.S. 3 (1997); Klor s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 210, 214 (1959) (rejecting the lower court s holding that impact on price, output, or quality was a sine qua non of a section 1 violation); id. at 213 (declaring a group boycott unlawful per se because it interfered with the plaintiff s freedom to buy appliances in an open competitive market and [drove] it out of business as a dealer in the defendants products ); Bd. of Trade of Chi. v. United States, 246 U.S. 231, (1918) (announcing a multifactor rule of reason test requiring courts to consider, inter alia, the impact of the challenged restraint on the length of the work day for the parties that imposed the restraint). 28 See Frank H. Easterbrook, Is There A Ratchet in Antitrust Law?, 60 TEX. L. REV. 705, 715 (1982) (describing the so-called inhospitality tradition of antitrust, whereby courts... str[uck] down business practices that were not clearly procompetitive. In this tradition an inference of monopolization followed from the courts inability to grasp how a practice might be consistent with substantial competition. The tradition took hold when many practices were genuine mysteries to economists, and monopolistic explanations of mysteries were congenial. The same tradition emphasized competition in the spot market. ); Meese, supra note 24, at 124 n.245 (describing the origin of the term inhospitality tradition ). 29 See, e.g., Klor s, Inc., 359 U.S. at 211 (invoking Standard Oil with approval as a landmark case and purporting to apply it). 30 See, e.g., id. at 210 (finding a practice unlawful per se despite the absence of any allegation that the contract impacted the price, quantity, or quality offered the public... [or] that there was any intent or purpose to effect a change in, or an influence on, prices, quantity, or quality (quoting Klor s, Inc. v. Broadway-Hale Stores, Inc., 255 F.2d 214, 230 (9th Cir. 1958))).

9 2020 notre dame law review [vol. 92:5 ence for wealth maximization as the exclusive goal of antitrust regulation. 31 As a scientific matter, Chicago critiqued numerous economic assumptions that drove inhospitality caselaw, assumptions that produced hostility toward nonstandard contracts, that is, agreements that departed from atomistic competition. 32 Finally, as a jurisprudential matter, Chicagoans claimed that the Sherman Act itself required courts to implement Chicago s preferred normative standard, 33 and also authorized courts to adjust antitrust doctrine over time in response to changes in economic theory. 34 Most famously, of course, Robert Bork argued that the legislative history of the Sherman Act established that Congress meant to ban only those restraints that reduced consumer welfare, which Bork equated with consumer want satisfaction or total welfare. 35 Among other things, Bork contended that congressional debates articulated and endorsed a fictitious version of the common law con- 31 See, e.g., ROBERT H. BORK, THE ANTITRUST PARADOX: A POLICY AT WAR WITH ITSELF (1978). As I have explained elsewhere, the so-called Harvard School of antitrust analysis embraced the same total welfare normative premise derived from neoclassical economics, beginning in the 1950s. See Alan J. Meese, Debunking the Purchaser Welfare Account of Section 2 of the Sherman Act: How Harvard Brought Us a Total Welfare Standard and Why We Should Keep It, 85 N.Y.U. L. REV. 659 (2010). However, the Harvard School s reliance upon neoclassical price theory to interpret the impact of various nonstandard agreements led it to condemn numerous agreements that economists now interpret as beneficial or benign. See, e.g., Meese, supra note 24, at (describing such reliance on price theory by leading members of the Harvard School during the 1950s and 1960s). 32 See, e.g., BORK, supra note 31, at (tying); Bork, supra note 24; Frank H. Easterbrook, Vertical Arrangements and the Rule of Reason, 53 ANTITRUST L.J. 135 (1984); Victor P. Goldberg, The Law and Economics of Vertical Restrictions: A Relational Perspective, 58 TEX. L. REV. 91 (1979); Howard P. Marvel, Exclusive Dealing, 25 J.L. & ECON. 1 (1982); Lester G. Telser, Why Should Manufacturers Want Fair Trade?, 3 J.L. & ECON. 86 (1960); see also Alan J. Meese, Robert Bork s Forgotten Role in the Transaction Cost Revolution, 79 ANTITRUST L.J. 953 (2014). 33 See, e.g., BORK, supra note 31, at 72 73; RICHARD A. POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE (1976); Robert H. Bork, Legislative Intent and the Policy of the Sherman Act, 9 J.L. & ECON. 7 (1966) (contending that the Sherman Act bans only those restraints that reduce overall consumer welfare or consumer want satisfaction ). 34 See, e.g., Bork, supra note 33, at 48 ( Courts charged by Congress with the maximization of consumer welfare are free to revise not only prior judge-made rules but, it would seem, rules contemplated by Congress. The Sherman Act defines the class of situations to which it may be applied, but it does not freeze into statutory commands the rules of legality about predation, mergers, and so forth, that many congressmen contemplated. Sherman and others clearly believed that they were legislating a policy and delegating to the courts the elaboration of subsidiary rules. Nothing in the legislative history or in the language of the statute suggests that courts are required to hold any specific type of agreement or behavior unlawful regardless of its probable impact upon consumers. In terms of the law, therefore, the Sherman Act tells judges very little. A judge who feels compelled to a particular result regardless of the teachings of economic theory deceives himself and abdicates his delegated responsibility. That responsibility is nothing less than the awesome task of continually creating and recreating the Sherman Act out of his understanding of economics and his conception of the requirements of the judicial process. ). 35 Id. at 7 ( [T]he policy the courts were intended to apply is the maximization of wealth or consumer want satisfaction. ).

10 2017] justice scalia and sherman act textualism 2021 cerned solely with consumer welfare as Bork defined it. 36 Courts implementing this command, he said, should not feel bound by prior judge-made rules or even rules contemplated by Congress. 37 Instead, he said, courts should accept the awesome task of continually creating and recreating the Sherman Act out of [their] understanding of economics and [their] conception of the requirements of the judicial process. 38 Other Chicagoans expressed their agreement with Bork s assessment of the meaning of the Sherman Act as well as Bork s contention that the Act authorized courts to adjust antitrust doctrine in light of modern economic theory. 39 The Chicago School has won the day with respect to most antitrust questions. While some have characterized this victory as a triumph of economics or ideology over law, Chicago seems simply to have resurrected Standard Oil s version of the Rule of Reason, with its exclusive emphasis on the economic effects of challenged restraints and its admonition that courts ascertain those effects in the light of reason sensitive to changed economic conceptions. 40 Indeed, even before his famous examination of the Sherman Act s legislative history, Robert Bork concluded that Standard Oil articulated a Rule of Reason containing a dynamic principle and focused on banning restraints that produced monopoly or the consequences thereof See id. at ( Sherman and the others also repeatedly stated what the common law was. The fact that their statements did not accurately mirror that confused body of precedent does not obscure what they intended to convey. It is clear from the debates that the common law relevant to the Sherman Act is an artificial construct, made up for the occasion out of a careful selection of recent decisions from a variety of jurisdictions plus a liberal admixture of the senators own policy prescriptions. It is to this common law, holding full sway nowhere but in the debates of the Fifty-first Congress, that one must look to understand the Sherman Act. ); see also id. at 36 ( The common law of restraints of trade... has been a variable growth, composed of diverse and even contradictory strains, many of them obviously irrelevant to the concerns of the Sherman Act. ); Robert H. Bork, Ancillary Restraints and the Sherman Act, 15 A.B.A. ANTITRUST SEC. 211, (1959) (contending that the common law enforced some ancillary restraints that restricted rivalry with no offsetting benefits and thus harmed consumers). 37 Bork, supra note 33, at Id. 39 See, e.g., Easterbook, supra note 28, at 706 ( The Sherman and Clayton Acts authorized the Supreme Court to invent and enforce a law of restraint of trade in the common law fashion. The Court has consistently drawn on the common law tradition. The common law evolves as circumstances change and learning grows. (footnotes omitted)). 40 See supra notes and accompanying text. 41 See Bork, supra note 24, at 804 (concluding that Standard Oil announced a rule of reason keyed to the avoidance of the consequences of monopoly and had placed upon the courts the duty of performing economic analysis to determine in which acts and agreements the evils of monopoly were present ); id. at 805 ( It should be stressed that White s test was phrased wholly in economic terms, giving no evidence of concern for possibly competing values. A corollary of this value choice is that the law should develop according to the progress of economic thought. The law is, therefore, neither made inflexible by controlling precedent nor required to change only through abrupt shifts of basic doctrine. Thus a court could alter the law without repudiating the theory underlying prior decisions by explaining that those decisions had misconceived the economic effect of particular

11 2022 notre dame law review [vol. 92:5 II. JUSTICE SCALIA S EMBRACE OF THE CHICAGO SCHOOL Justice Scalia embraced the Chicago/Standard Oil approach to antitrust questions. His opinions in Business Electronics Corp. v. Sharp Electronics Corp., 42 Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 43 and Eastman Kodak Co. v. Image Technical Services, Inc., 44 all embraced the assumption that the Sherman Act banned only those restraints or other conduct that produced overall economic harm. 45 Each decision also employed Chicagostyle reasoning to reach doctrinal results propounded or endorsed by leading Chicago figures. 46 Business Electronics in particular embraced Chicago s normative, scientific, and jurisprudential facets. For instance, in language reminiscent of Standard Oil s reference to evolving economic conceptions, the Justice expressly opined that antitrust courts could approve agreements that 1890 courts condemned, claiming that the Sherman Act adopted the common law governing trade restraints along with its dynamic potential. 47 As a result, he said, courts should ask whether challenged restraints produce a particular economic consequence, and not, he said, whether such agreements were enforceable or not when Congress passed the Act. 48 Moreover, agreements or practices. ); id. at 802 (explaining that in Standard Oil a dynamic principle was built into the rule of reason so that the law could change as economic understanding progressed ). Bork did not, it should be noted, mention Standard Oil s invocation of liberty of contract. See Meese, supra note 23, at (discussing Bork s failure to mention Standard Oil s invocation of liberty of contract) U.S. 717 (1988) U.S. 398 (2004) U.S. 451 (1992). 45 Indeed, in Trinko, the Justice went so far as to conclude that the possession of monopoly power in the short run did not, absent some anticompetitive conduct, violate section 2. See Trinko, 540 U.S. at 407 ( The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices at least for a short period is what attracts business acumen in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct. ). In so doing, the Justice mimicked the statement in Standard Oil that the Sherman Act does not prohibit monopoly in the concrete but only that monopoly obtained by misuse of the right to contract. See 221 U.S 1, 62 (1911) (noting the omission of any direct prohibition against monopoly in the concrete, and concluding that a monopoly would not survive in the long run unless a right to make unlawful contracts having a monopolistic tendency were permitted ). 46 See, e.g., Eastman Kodak, 504 U.S. at (Scalia, J., dissenting). 47 See Bus. Elecs., 485 U.S. at 732 ( The Sherman Act adopted the term restraint of trade along with its dynamic potential. It invokes the common law itself, and not merely the static content that the common law had assigned to the term in (citing, inter alia, BORK, supra note 31, at 37)); see also Bork, supra note 33, at 48 (opining that the Sherman Act authorized courts to revise not only prior judge-made rules but, it would seem, rules contemplated by Congress ). 48 See Bus. Elecs., 485 U.S. at 731 ( The term restraint of trade in the statute, like the term at common law, refers not to a particular list of agreements, but to a particular economic consequence, which may be produced by quite different sorts of agreements in

12 2017] justice scalia and sherman act textualism 2023 and again like Standard Oil, he opined that the only relevant consequence that could require condemnation under the Rule of Reason was purely economic, namely, the exercise of market power detrimental to consumers. 49 Finally, relying on the (scientific) work of Robert Bork and Richard Posner, he concluded that agreements whereby manufacturers ensured the efficient marketing of their products, by combating retailer free riding, did not produce that prohibited consequence but instead furthered interbrand competition, the primary concern of the antitrust law[s]. 50 In addition to those antitrust opinions he authored himself, the Justice joined several opinions that embraced a similar approach, including opinions that invoked the Justice s opinion in Business Electronics. For instance, the Justice joined Justice O Connor s unanimous opinion in State Oil Co. v. Khan, which overturned the per se rule against maximum resale price maintenance announced in In Khan the Court unanimously embraced modern economic critiques of the per se ban on maximum resale price maintenance. 52 The Court cited Business Electronics for the proposition that analysis of vertical restraints should be guided by the assumption that interbrand competition is the primary concern of the antitrust laws. 53 Invoking the views of Robert Bork, Frank Easterbrook, Richard Posner, and others sympathetic to the Chicago School, the Court concluded that the ban prevented efficient marketing practices that furthered interbrand competition. 54 It was not enough that Albrecht s per se rule was incorrect, however. Instead, the Court had to decide whether considerations of stare decisis nonetheless required retention of the rule. The Court conceded that stare decisis generally had a stronger claim in the statutory context and in cases involving property and contract rights. 55 Still, the Court concluded that such considerations were less potent in the antitrust context, because Congress expected the courts to give shape to the statute s broad mandate by drawing varying times and circumstances. The changing content of the term restraint of trade was well recognized at the time the Sherman Act was enacted. ). 49 See id. at (treating potential to facilitate cartelizing as the only potential harm from vertical restraints); cf. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 59 (1977) (White, J., concurring in the judgment) (contending that a restraint s restriction of dealer autonomy was a cognizable antitrust harm); id. at 67 (approving previous decisions purportedly protecting the freedom of the businessman to dispose of his own goods as he sees fit ); Albrecht v. Herald Co., 390 U.S. 145 (1968) (concluding that a restraint s supposed impact on the freedom of individual traders was a cognizable antitrust harm), overruled by State Oil Co. v. Khan, 522 U.S. 3 (1997). 50 See Bus. Elecs., 485 U.S. at (stating that interbrand competition [is] the primary concern of antitrust law (quoting Continental T.V., 433 U.S. at 52 n.19)); id. at 726 (reiterating that promotion of interbrand competition is the primary consideration of the antitrust laws) U.S. at 18. Khan, of course, overruled Albrecht, 390 U.S See Khan, 522 U.S. at Id. at 15 (citing Bus. Elecs., 485 U.S. at 717, 726). 54 See id. at (citing, inter alia, BORK, supra note 31, at ; Frank H. Easterbrook, Maximum Price Fixing, 48 U. CHI. L. REV. 886, (1981)). 55 See id. at

13 2024 notre dame law review [vol. 92:5 on common-law tradition. 56 Quoting Business Electronics, the Court opined that the Sherman Act invokes the common law itself, and not merely the static content that the common law had assigned to the term in The Court also repeated Business Electronics assertion that different sorts of agreements may amount to restraints of trade in varying times and circumstances. 58 Perhaps most notably, the Justice joined the Court s 2007 majority opinion in Leegin Creative Leather Products, Inc. v. PSKS, Inc., supplying one of the five votes for that hotly contested decision. 59 Leegin, of course, overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., repudiating the Sherman Act s ban on minimum resale price maintenance that had stood for ninety-six years. 60 While Justice Scalia did not write separately in Leegin, his voice was nonetheless evident throughout the opinion. Indeed, Justice Kennedy s majority opinion cited or quoted Business Electronics over ten times, 61 including for the propositions that: (1) the Sherman Act authorizes courts to adjust antitrust doctrine in a common-law fashion in light of changed economic conceptions and (2) the standard governing such adjustment is one of economic efficiency. 62 Moreover, the Justice endorsed Leegin s description of the Sherman Act as authorizing courts to create a common law of antitrust in his recent treatise on legal interpretation See id. at (quoting Nat l Soc y of Prof l Eng rs v. United States, 435 U.S. 679, 688 (1978)). 57 See id. at 21 ( As we have explained, the term restraint of trade, as used in 1, also invokes the common law itself, and not merely the static content that the common law had assigned to the term in (quoting Bus. Elecs., 485 U.S. at 732)). 58 See id. at 21 (quoting Bus. Elecs., 485 U.S. at ) U.S. 877, 880 (2007); id. at (Breyer, J., dissenting) (questioning the Court s assessment of the potential harms and benefits of minimum rpm and contending that considerations of stare decisis required adherence to the longstanding per se rule against minimum rpm). 60 Id. at 882 (majority opinion). 61 See id. at See, e.g., id. at 888 ( [T]he Sherman Act s use of restraint of trade invokes the common law itself,... not merely the static content that the common law had assigned to the term in (quoting Bus. Elecs., 485 U.S. at 732)); id. at 894 (proposing that per se condemnation is only appropriate where the challenged agreement always or almost always tend[s] to restrict competition and decrease output (quoting Bus. Elecs., 485 U.S. at 723)); id. at (citing Business Electronics several times when discussing various positive and negative economic effects of minimum resale price maintenance). 63 ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 96 (2012) ( [I]t is possible, though rare, for a statute to leave a matter to future common-law development by the courts either expressly or (where the statute deals with a traditional field of common-law jurisprudence) by implication. An example of the latter is the Sherman Act, whose reference to restraint of trade has always been taken to refer to activity (so denominated) that the common law made unlawful and to authorize continuing development of that common law by federal courts. (citing Leegin, 551 U.S. at 888)).

14 2017] justice scalia and sherman act textualism 2025 Unlike Robert Bork, the Justice did not invoke the Sherman Act s legislative history in support of the approach he articulated in Business Electronics. 64 After all, Justice Scalia s textualism excludes such reliance on such legislative history as a guide to the meaning of the Act. 65 Indeed, efforts by Bork and others to derive meaning from the legislative history of the Act exemplify some of the shortcomings of such exercises that the Justice identified. 66 As a textualist, the Justice also disclaimed any status as a common-law judge. 67 At 64 See Bork, supra note 33, at 11. But see Daniel A. Crane, The Tempting of Antitrust: Robert Bork and the Goals of Antitrust Policy, 79 ANTITRUST L.J. 835, 844 (2014) ( Subjective congressional intent, as manifested in legislative history, mattered far less than leading criticisms of Bork suggest. Bork s arguments about the purposes of the antitrust laws were primarily grounded in a conventional suite of interpretive methodologies, including textual analysis, a whole code reading of the antitrust laws, critical analysis of leading judicial expositors, and arguments about judicial restraint. With the emergence of textualism and objective approaches to statutory interpretation and the continued discussion about the value and meaning of judicial restraint, Bork s arguments should be understood as significantly broader than the legislative history claims that have figured almost exclusively in the criticisms of his arguments in favor reading the antitrust laws to advance a consumer welfare objective. ). It is perhaps noteworthy that Bork acknowledged that Justice Scalia was particularly helpful with the final chapter of The Antitrust Paradox. See BORK, supra note 31, at xvi. That chapter included several pages examining Social Policy and the Lawmaking Process, including the process of judicial exposition of the meaning of the Sherman Act. See id. at See ANTONIN SCALIA, A MATTER OF INTERPRETATION: FEDERAL COURTS AND THE LAW (Amy Gutmann ed., 1997). 66 See, e.g., id.; Adrian Vermeule, Legislative History and the Limits of Judicial Competence: The Untold Story of Holy Trinity Church, 50 STAN. L. REV (1998). For instance, like many who invoke the Act s legislative history, Bork invokes various floor statements by senators, including Senator Sherman, critiquing or praising various bills introduced by Sherman. Bork also invokes various common-law decisions discussed by Sherman as exemplifying a highly artificial version of the common law that exemplifies the operative principle contained in the Act. Bork, supra note 33, at 13. None of Sherman s proposals ever became law, however. Instead, the Senate reassigned jurisdiction over Sherman s bill to the Judiciary Committee, which rewrote the bill in its entirety. See WILLIAM LETWIN, LAW AND ECONOMIC POLICY IN AMERICA: THE EVOLU- TION OF THE SHERMAN ANTITRUST ACT 94 (Random House 1965) (1954) ( The Judiciary Committee took the matter out of Sherman s hands, much to his regret and anger. ); HANS B. THORELLI, THE FEDERAL ANTITRUST POLICY: ORIGINATION OF AN AMERICAN TRADI- TION (1955). Sherman both excoriated the new bill and signaled his support on the same day. See LETWIN, supra, at 94. Bork recognized this potential disconnect but contended that the bill that ultimately passed reflected the very same policy as the various versions that Sherman introduced. See Bork, supra note 33, at 15 17; see also LETWIN, supra, at 94 (contending that the final statutory language was in broad outline the same as Sherman s original bill ). Other scholars disagree after reviewing the very same legislative history Bork reviewed. See, e.g., PERITZ, supra note 23, at (concluding that the final amendment narrowed the scope of the Act compared to prior drafts); MARTIN J. SKLAR, THE CORPORATE RECONSTRUCTION OF AMERICAN CAPITALISM, , at (1988) (same). 67 See SCALIA, supra note 65, at 14 ( [A]ttacking the enterprise [of statutory interpretation] with the Mr. Fix-it mentality of the common-law judge is a sure recipe for incompetence and usurpation. ).

15 2026 notre dame law review [vol. 92:5 first glance, these interpretive commitments are difficult to square with the Justice s jurisprudential embrace of Chicago antitrust or for that matter Standard Oil s Rule of Reason. The Chicago School, after all, is just that, a school of antitrust thought. Moreover, the Sherman Act is a statute, and one passed long before there was a Chicago School. The text of the Act does not mention efficiency, competition, prices, output, or any synonyms of these terms. Nor does it purport to authorize judges or any other officials to adjust the meaning of in restraint of trade in response to changing economic theory or anything else. If, as the Justice passionately argued, federal judges must abjure both legislative history and a common-law approach to reading and applying statutes, how can they engraft onto the Sherman Act concepts such as allocative efficiency and free riding? Moreover, how can such judges condemn restraints deemed perfectly lawful by the Congress that passed the Act or validate those the 1890 Congress would have condemned? To put a finer point on things, how does the ordinary public meaning of the term in restraint of trade in 1890 empower unelected judges to transform the Chicago School of antitrust analysis or any other school for that matter into federal law? Some scholars have noticed what they believe to be a disconnect between Justice Scalia s professed method of statutory interpretation and his embrace of Chicago s antitrust prescriptions. 68 Most notably, Daniel Farber and Brett McDonnell contend that it is simply not possible to reconcile modern antitrust, including Business Electronics, with Justice Scalia s professed commitment to a textual method of interpretation. In particular, these scholars contend that the term in restraint of trade was, in 1890, a legal term of art laden with meaning developed by common-law courts, including the Supreme Court itself. 69 Justice Scalia s brand of textualism, they say, would require the Court to read the phrase in restraint of trade to incorporate that meaning, banning those contracts deemed unenforceable at common law when Congress passed the Sherman Act. 70 Embrace of the Chicago School approach, they say, contradicts this result. To be precise, these scholars assert that the common law of 1890 did not embrace efficiency or even the welfare of purchasers as the exclusive animating principle in such cases. 71 Instead, they claim that the common law s goals were fairness and economic independence and that the common law was frequently indiffer- 68 See Daniel A. Farber & Brett H. McDonnell, Is There a Text in This Class? The Conflict Between Textualism and Antitrust, 14 J. CONTEMP. LEGAL ISSUES 619 (2005); see also Lawrence Lessig, Fidelity in Translation, 71 TEX. L. REV. 1165, 1250 (1993) (suggesting that Business Electronics endorsement of consumer welfare as the animating principle of antitrust is, as a historical matter, on weak ground ). 69 See Farber & McDonnell, supra note 68, at 660; see also, e.g., Fowle v. Park, 131 U.S. 88 (1889) (exercising diversity jurisdiction over an action alleging breach of contract); Gibbs v. Consol. Gas Co. of Balt., 130 U.S. 396 (1889) (same); Or. Steam Navigation Co. v. Winsor, 87 U.S. (20 Wall.) 64, 66 (1873) (exercising appellate jurisdiction over a territorial court s adjudication of a contract dispute). 70 See Farber & McDonnell, supra note 68, at See id. at